Question

Kimberly has a credit card with a 19% APR and a balance of $4,350. With her current monthly payment, Kimberly will be able to pay off the credit card in a mere 16 months. But when Kimberly's car breaks down, she is forced to charge an additional $1,600 to her credit card. How much will Kimberly's minimum monthly payment increase if she still wants to pay off her credit card in 16 months?
a.
$100.00
b.
$113.99
c.
$309.90
d.
$423.89


Please select the best answer from the choices provided.

A
B
C
D

Answer 1

Monthly rate r = 0.19/12 ≈ 0.01583333. The monthly payment to amortize a balance B in n = 16 months is
P = B * r / (1 - (1+r)^(-16)).

Compute the payment factor once:
m = r / (1 - (1+r)^(-16)) ≈ 0.07124375.

Initial payment: P1 = 4350 * m ≈ $309.90.
New payment after $1600 charge: P2 = 5950 * m ≈ $423.89.
Increase: P2 − P1 ≈ $113.99.

Answer: B ($113.99).